Three Easy Steps to Effective Budgeting

A part of being an adult that stresses a lot of us out is budgeting. But its a necessary part of life, you should have a budget and if you don’t, feel free to use the outline below to start.

Budgeting sounds so serious and time consuming , and it really doesn’t have to be. A budget only needs to track three things: your income, your expenses, and income left over after all expenses have been paid. While I personally track everything I can possibly track because I really enjoy budgeting.; there is no need to track twenty things when you can take control of your financial health only tracking three.

Tracking your income is pretty simple, go through your bank statements, offer letters, employment contract, pay stubs, etc to determine what your monthly income is. If you have a side hustle, factor that in as well. Your total income is important because it determines the what you can afford to spend, save and invest.

Tracking your expenses can be a little tricky. Personally, I printed my bank statement from a typical month for me(it was July, with only two pay periods. I sometimes receive three paychecks a month and work overtime, so I made sure to pick a two pay period month with no overtime, ensuring that I would be able to use this budget for all months to come). I highlighted all of my fixed bills like rent, student debt repayment and utilities in a green highlighter and everything else in orange. The fixed expenses have remained the same to this day, so I know if I want to vacation, I need to save at least that much before I head to trips. The variable expenses like groceries, toiletries, beauty treatments helped me to see just how much discretionary income I had. I reevaluate my budget annually and every time(because of income fluctuations) I’m able to decrease my variable spending and increase my automatic transfers to savings and investment apps.

Monitoring cash flow, or tracking income versus expenses(both fixed and variable) is what allows you to really take control of your finances. The biggest and most immediate goal is to have your expenses be less than your income. The bigger the gap, the larger your savings and investments can be, which is how you get to financial independence.

Tracking these three things monthly takes about thirty minutes of my month, but sets me up for success and has bolstered my savings account more in the two years I’ve been using the method than the past four years of my working history.

Developing a habit of reviewing your finances through budgeting sets you years ahead in the financial game.

Let me know how budgeting goes for you, this month!